Review Customer Loyalty Perception And Satisfaction Marketing Essay

Published Date: 23 Mar 2015

LITERATURE REVIEW

A literature review is a body of text that aims to review the critical points of current knowledge on a particular topic.

Most often associated with science-oriented literature, such as a thesis, the literature review usually precedes a research proposal, methodology and results section. Its ultimate goal is to bring the reader up to date with current literature on a topic and forms the basis for another goal, such as future research that may be needed in the area.

A good literature review is characterized by: a logical flow of ideas; current and relevant references with consistent, appropriate referencing style; proper use of terminology; and an unbiased and comprehensive view of the previous research on the topic.

According to Cooper (1988) "a literature review uses as its database reports of primary or original scholarship, and does not report new primary scholarship itself. The primary reports used in the literature may be verbal, but in the vast majority of cases reports are written documents. The types of scholarship may be empirical, theoretical, critical/analytic, or methodological in nature. Second a literature review seeks to describe, summarize, evaluate, clarify and/or integrate the content of primary reports".

Customer Perception

Customer perception has several definitions. It is considered as different from quality of goods where it is intangible and it has a challenge to marketers whereby service given is not easily communicated. The perception of customer towards the service quality offered by service providers is a competitive advantage among its rivals and it is often a major challenge for companies to deliver the service process with quality consistently. A service with high-quality has a competitive advantage in attracting new customers which contributes to the market share. So perceived high service quality will incline and increase buying quantity, frequency, as well as spreading positive word of mouth.

"Service quality differs from quality of goods, in that service are intangible. This presents a challenge to marketers; service cannot easily be communicated to customers, and hence quality maybe difficult for customers to assess. Service are characterized as being intangible, perishable, produced and consumed simultaneously, and heterogeneous" (Zeithaml and Bitner, 2000; cited by van der Wal et al., 2002).

According to Johnson and Sirikit (2002), Leisen and Vance (2001), and van der Wal et al. (2002), the perception of customer towards the service quality offered by service providers is a competitive advantage among its rivals and it is often a major challenge for companies to deliver the service process with quality consistently. A service with high-quality has a competitive advantage in attracting new customers which contributes to the market share. So perceived high service quality will incline and increase buying quantity, frequency, as well as spreading positive word of mouth (Venetis and Ghauri, 2000; Cited in Aydin and Ozer, 2005).

A service quality model, known as SERVQUAL model is used in the researches of Johnson and Sirikit (2002), Leisen and Vance (2001), and van der Wal et al. (2002). SERVQUAL consist of five dimensions, which are reliability, responsiveness, assurance, empathy, and tangibles. According to van der Wal et al. (2002), a list of attributes that define service quality is developed and the categories are:

1. Tangibles - includes the telecommunication service provider's physical facilities, equipment, and dress of their employees, décor and communications materials.

2. Reliability - refers to the ability of the telecommunication service provider to perform the promised service dependably and accurately.

3. Responsiveness - refers to the willingness of the telecommunication service provider's staff to aid customers and to provide the requested service promptly.

4. Assurance - refers to the knowledge and courtesy of the telecommunication service provider's employee and their ability to inspire trust and confidence in the customer towards the service company.

5. Empathy - refers to the ability of the service provider to offer a considerate and personalized attention to each customer.

These researches mainly test the association of customer perception on service quality among customer satisfaction and customer loyalty. There are also researchers who do not use the SERVQUAL model to evaluate customers' perception on service quality as it is inefficient in data collection. A more compress questionnaire was put together in Aydin and Ozer's research (2005).

Findings vary exceptionally as tangible dimension in customer perception are extremely important (Johnson and Sirikit, 2002) while in van der Wal et al.'s (2002) research, responsiveness dimension is rated the highest in terms of importance while tangible dimension is rated least important. In van der Wal et al.'s research (2002), the level of cohesion is significantly high in every category. There are also findings that suggest service quality is remarkably important to overall satisfaction with the telecommunication service (Leisen and Vance, 2001).

Customer Satisfaction

The definition of customer satisfaction defines as:

"The overall attitude consumers have toward a good or service after they have acquired and used it. It is a post-choice evaluative judgment resulting from a specific purchase selection and the experience from using it" (Mowen and Minor, 1998).

Customer satisfaction brings many advantages as satisfied customers are not really price sensitive, buy additional products, are less influenced by competitors and stay as loyal customer. Customer satisfaction is stated where it has been deemed directly to affect customer retention and companies' market share. In banks, service quality, service features, and customer-complaint handling determine customer satisfaction. Few factors that affect satisfaction are prolonged hours of operation and competitive interest rates as researched by the study of Levesque and McDougall (1996). In addition, there are analysts who talks about the links between satisfaction, loyalty, and profitability (Heskett et al, 1994). They are proponents of the theory called service management, which discusses that "customer satisfaction is the result of a customer's perception of the value got in a relationship relative to the value expected from transactions or relationships with competing industries. Pertaining to this theory, Hansemark and Albinsson (2004) stated: "Loyalty behaviours, including relationship continuance, increased scale or scope of relationship, and recommendation (word of mouth advertising) as a result from customers' beliefs that the quantity of value received from one supplier is greater than that available from other suppliers". It is also stated that loyalty, in one or more of the forms noted above, creates uprising profit through enhanced revenues, lowered costs to acquire customers, lower customer-price sensitivity, and reduced costs to satisfy customers familiar with a firm's service delivery system.

According to Athanassopoulos and Iliakopoulos (2003), the focus on customer satisfaction has matured from being a simple measurement to an imperative measurement that affects a firm's competitiveness. In showing the association between variables, there is considerable evidence that perception on service quality act as an antecedent to customer satisfaction, which eventually leads to customer loyalty (Johnson and Sirikit, 2002). In the same way, Leisen and Vance (2001) affirmed the association.

In assessing literatures on customer satisfaction, contact points between the service provider and the customer were used as a reference point in the research done by Athanassopoulos and Iliakopoulos (2003). The contact points are the actual usage of the product, directory enquiries, fault repair, branch network, and billing process.

All these contact point will shape the overall judgment in satisfaction on the service provider (Athanassopoulos and Iliakopoulos, 2003).

1. Directory Enquiries - are referred to the traditional basic point of reference for customers of the telecommunication service provider. The call made to the service provider's customer service toll-free number is one of the examples of directory enquires.

2. Fault Repair - it is referred as the ability of the service provider to act promptly and accurately in servicing or repairing the faults for the customers.

3. Branch Network - refers as the physical network of activity units that are visited by customers for purposes such as payment of bills, service provision, purchases of new products, and complaint handling.

4. Billing - refers to the dimension upon which telecommunication service providers are monitored for the customer satisfaction. The construct includes bill delivery, bill content, the presentation of the bill, and most importantly, the extent of customers' trust towards the content of their bill.

It has been found that all these contact points are significantly associated in developing customer satisfaction with directory enquiries being marginally the highest (Athanassopoulos and Iliakopoulos, 2003). According to Athanassopoulos and Iliakopoulos (2003), the question items used to capture directory inquiries from the customer are found yield high loading coefficients and high reliability indices. As for fault repair, captures of long-term memory of customers concerning their satisfaction from recent contacts and other complementary aspects of provided services yielded very satisfactory loadings and high convergent validity measures on reliability (Athanassopoulos and Iliakopoulos, 2003). Branch network captures on issues such as satisfaction on tangibles (location and hours of operation) and satisfaction on customer service is found to yield a very high degree of convergent validity of the construct (Athanassopoulos and Iliakopoulos, 2003). As for the aspect of billing, the construct includes question item such as bill delivery, bill content, the presentation of the bill, and the extent of customers' trust towards the content of their bill were found to be high in loadings with satisfactory construct reliability but relatively low variance according benchmarks of other researchers (Athanassopoulos and Iliakopoulos, 2003).

Although the findings prove that directory enquiries being the most significant, other variables should be considered equally important as the significant levels are very high.

Customer Loyalty

Customer loyalty is about creating and retaining a relationship with your customers. A crucial area to this mutually beneficial relationship is the awareness of customer preference or the present and potential needs and wants of a customer about any aspect of the business, regardless it is about products or services because of possible customer turnover which will lead to reduced profits. Loyal customers can be better to convince to give a try new products or services, charge higher prices and use as a willing referral.

The business most benefit objective is to get customer loyalty. It has a constructive effect on company culture, development and bottom line. Customers will be able to look that the company is geared towards maintaining customers through all business processes from management to staff. Aside from having such objective, gaining customer loyalty is also a crucial problem today especially in this increasingly competitive and crowded marketplace because of the eventual profitability it will give especially in terms of international marketing.

It has been noticed that customers have current and potential value to companies. Another benefit of having a loyal customer base is that it is more inexpensive to maintain one than acquiring new customers. We say that the cost to get new customers amount to 5-10 times more than that of keeping a customer because there are a lot more tasks to be done to acquire new customers. The focus can be changed to improving the product and quality of service if there is customer loyalty based. In 1999, fashion retail giant, Marks and Spencer's (M&S) suffered a big loyalty test in Northern Ireland when customers expressed dissatisfaction about the stagnant fashion, inconsistency of sizes and high prices (Pura, 2005).

Customer loyalty is always negotiated and discussed in the recent years. Marketers have urged to create so-called loyalty schemes but do not always seem to have considered the key elements of why consumers remain loyal to a brand. Some schemes have been cancelled and new schemes were created because customers use their card less nowadays. It is clearly a good time review the concept of customer or consumer loyalty.

Firstly, a loyal customer and a satisfied customer are not really the same thing. Customers may remain loyal for reasons and may not even be happy with the product or service. A lack of customer defections does not necessarily indicate satisfied consumers. The cost of switching to an alternative supplier may be prohibitive or there may be a penalty clause.

·         Switching supplier may be inconvenient.

·         The alternatives may not be attractive.

Secondly, there are few reasons why a consumer may be loyal to a product, service or brand. These might include convenience or price. The main reason for staying loyal is sincere satisfaction of the customers. It is not about the marketer operating a defined loyalty scheme even though this does have the possibility to offer advantages in the area of improved consumer understanding and the data mining or merchandising opportunities that flow from this.

Countless marketing academicians, statisticians and marketing professionals have beaten the truth that it is more costly to acquire a new customer than to retain an existing one. Companies require programs to obtain and retain loyalty of customers in the face of increasing product parity and intensifying competition. However, the issues do not only stop to loyalty programs but also it is about the form and objectives of such programs (Munnukka, 2005)

Customer loyalty is defined as the tendency of a client to choose one business or product over another for his or her particular needs or demand. As an example, in the packaged goods industry, clients may be described as being "brand loyal" since they tend to choose a specific brand more often than others.  Remember that the use of the word "choose" in the context of customer loyalty becomes more evident when choices are being made and actions were taken by any customers.  It can be said that loyalty is shown by the actions of the customer.

It is also mentioned that customer loyalty has become a catch-all term for the outcome of different marketing methodise in which customer data is used.  Customer loyalty is the result of well-handled customer retention programs; customers who are given attention by a retention program demonstrate higher loyalty to a business. All customer retention programs rely on communicating with customers, giving them encouragement to remain active and choosing to do business with a company.

Consequently, there is an interaction between the desired results and customer satisfaction, customer loyalty and customer retention. They may go by other definitions such as customers, clients, buyers, etc.  Without the customer it is not possible for any business to live itself especially those who are competing in the international arena.  Achieving the desired results is frequently a result of customer actions.  Any business without attention on customer satisfaction is at the mercy of the market.  Without loyal customers eventually a competitor will get those desires and your customer retention rate will be lower.

Loyal client normally don't leave even for an appealing offer elsewhere.  At the very least they will provide you the chance to see or fight the other organisation with the same products or services.  Maintaining loyal customers is an important part of any business. One of the ways to get or maintain loyal clients is through possessing quality products and services which are so satisfying that there is very little chance that the demands of the customer will not be met. Of course one of the problems understands the true customer requirements. Even when you have the requirements in advance the customer can and will switch them without notice or excuse.  Having a good recovery process for a dissatisfied customer is a must do in this society.

Customer loyalty studies have been able to see and measures both the characters and experiences which directs to desirable behaviors. It is a study practice that is extremely actionable which it checks areas for improvement, prioritizes them, identifies remedies, and then provides feedback on their effectiveness. On the other hand, market researchers prefers to debate whether the scope of such research is really "customer satisfaction" or "customer loyalty." Most will debate whether loyalty is an attitude or a behavior. It is not difficult to get caught up in the semantics, but the bottom-line is clear.

Such theory applies each and everyone in the business market. Losing customer costs is also treated as a great deal of money, and in market environments that are experiencing slow growth, the existence of customer base company is a precious asset. High tech markets have a nasty way of shifting. Contemporary and direct business organisation, or firms offering substitute services and products, can develop sudden and unpleasant changes in the competitive business environment. In this regard, a company that has a clear comprehension of its perceived strengths and weaknesses are those organizations that will be well-prepared to enhance and market effective competitive strategies. Industries with small customer bases are in need of objective feedback as soon as they are able to have real, paying customers and loyal customers.

In the midst of all of this is the truth that it is easier and less cost to gain business from an existing customer than to attract a new one. Usually, greater focus is placed upon acquisition of new customers than satisfying existing ones. This is finally costly and the lack of current consumer focus inherent in the approach means that opportunities for uprising share of wallet from existing customers through cross-selling and upgrading products and services is lost.

Hence, this approach may frequently mean that companies are spending heavily to attract disloyal consumers and ignoring those who generate the most revenue and profits.

According to Dekimpe et al (1997; cited in Aydin and Ozer, 2005), a firm's successfulness depends on the capability to retain and making customers patronize to

it brand. There have been a number of definitions of customer loyalty given by different book authors and researches.

"Customer loyalty is defined as a deeply held commitment to re-buy or repatronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influence and marketing efforts having the potential to cause switching behaviour" (Oliver, 1997; Cited in Aydin and Ozer, 2005).

In customer loyalty, the process that a customer goes through before giving patronage towards a brand is where a previous purchase causes the customer to perceive a good quality towards the brand and being satisfied with the product.

It is identified from few different empirical studies; customer perceived service quality (perception) and customer satisfaction are the main variables correlated in building customer loyalty. The perceived service quality is important in measuring the loyalty of customers towards a service provider as it would show the exact reason why or why not the customers patronize the brand. Value of perceptions may also differ according to the usage situation (Anckar and D'Incau, 2002; cited by Pura, 2005).

In the literature review, contradiction among researchers has been found. In Aydin and Ozer (2005) research, perceived service quality has been found necessary but insufficient to condition customer loyalty while in Johnson and Sirikit (2002) affirmed by providing high quality service, customer satisfaction will occur resulting in customer loyalty. Most of these literatures are based in western countries, where the actual effects cannot be assumed in Malaysia. Therefore, this research topic on customer loyalty in telecommunication industry as their service has been chosen to further contribute to the knowledge on this topic in Malaysia.

Businesses around the world including telecommunication service providers are constantly seeking unique ways of differentiating their offerings (Johnson and Sirikit, 2002) in terms of innovativeness and quality to gain and sustain a competitive advantage (van der Wal, 2002). Based on the literature review from Athanassopoulos and Iliakopoulos research (2003), it is found that four distinct contact points between the customer and the telecommunications operator are significant, which projects customer satisfaction has a positive influence towards the telecommunication service provider.

These contact points happens when customers are contacted to the service provided by the telecommunication operators. There are four contact points are the directory enquiries, fault repair, network coverage, and billing process. Each contact point represents a very coherent service experience from the customer point of view (Athanassopoulos and Iliakopoulos, 2003). All transaction elements were found to contribute positively in the overall satisfaction (Athanassopoulos and Iliakopoulos,

2003).

Customer Relationship Management

 

Customer relationship management is focused on the usage of information technology so as to assists the organization to stay abreast of its customers' needs and concerns. Customer Relationship Management also assists the company to respond in time and appropriately to their customers' calls. On the other hand, it is stated that customer Relationship Management is a strategy and process issue that is related to several other strategies other than the application of technology. The approach on customer relationship management holds all business processes that an organization uses so as to determine, select, obtain, enhance and retain its customers. In the modern days, customer relationship management is seen as the integration of business processes, technological solutions and advanced analysis, which allows organizations to understand clients from a multifaceted perspective. Through this understanding, companies are able to establish deeper and more profitable customer relations (Zabin, 2004).

The customer relationship management strategy may be discussed as a new development in business and management, however, it has been available since time immemorial. There may be variations of the old theories in comparison to the present time but the aim remains the same. In the past, customer relationship management is applied in businesses through personal interactions. For example, a shop owner in the past would know all his customers by name, their lifestyles, hobbies, occupations and buying preferences (Kotler, 1991). When it is really required, all the information is kept and readily accessible for the shop owner to use. Nowadays, such thing might not be adaptable to modern organizations. As a substitute, organizations now rely on go-betweens to establish the connection for them. These come in the form of marketing vehicles, which act as a go-between communication flows, and contact management channels to intercede service and support flows (Kotler, 1991). Regardless of how the CRM is defined, the main rationale remains the same, and that is the application of strategies to improve customer relations.

It seems to be looked as a simple management task. On the surface, the implementation of customer relationship management needs several factors. For example, this strategy needs that an organization looks at customer relations as a means to know the needs and wants of its customers. The organization must create, satisfy and sustain its clients while concurrently helping in the attainment of its objectives (Butler, 2000). In the process to open up a customized solution geared towards the enhancement of customer functionality as well as to the recognition of new customer functionalities, customer intimacy and partnering are required (Kotler, 1991). In the other way round, networking of customer relationships which relate channel members, end users, advertising agencies, research firms are created and require management. As the overall, the three main things needs to be incorporated to a customer relationship management program. Such includes how to identify individual customers, how to gain relevant knowledge about individual customers and how to cross-sell to each individual customers in a real-time and context-sensitive manner (Zabin, 2004).

Else than such issue, the implementation of customer relationship management also needs the organizations to see the strategy holistically. This is defined that CRM can be assimilated well to all the processes within the organization, from marketing to collections. It is mentioned to be an issue because most organizations use customer relationship management have this tendency to view this strategy narrowly, seeing it as a mere strategically series of transactions. In return, the effective strategic implementation of customer relationship management requires data from all related departments for the reason of using customer information intelligently that will finally lead to the creation of strong customer partnerships or relations (Butler, 2000). As far as it is concerned, the consistency of the response from variety of customer points of contact with the company must also be addressed as a possible challenge. For example, customers who are online can obtain direct response to their applications, questions and suggestions. Such thing might not be a fact for customers who have connection with the company using a different channel such as the telephone or a traditional retail outlet.

When the organization understands what it requires, different strategies in CRM can be use. Personalization and online interactivity is suggested to be used to help build emotional connections with stakeholders in ways that no other medium can. Forrest and Mizerski (1996) maintain that the highest use of the Internet among businesses has been as a listening medium. The World Wide Web has changed into a medium with various generic relationships -building attributes (Butler, 2000). The greater the quality of the data a company can get about its customers, and the more comprehensive the data is, the more the organization will be able to use decision analysis to predict customer behavior (Butler, 2000). More focused and detailed relationship strategies can result from better predictions of customer needs. Online customer relationship management can boom the importance of the relationship for both customers and the e-business. Customers can get more products and communications that are more reliable to their needs and lifestyles, and the e-business can get advantage from a group of high-value repeat customers.

Looking at few considerations whereby the management has to do so that the CRM is correctly implemented, others are working to employ similar strategy. This is because to the truth that close customer relationships gives the marketer several advantages. One of which is the establishment of committed customers. Committed customers are actually greater than simple repeat purchasers as they have an emotional connection to the seller. These emotions may come in the form of trust, liking and believing in the organization's capability to respond instantly and effectively to a customer's concern (Butler, 2000). The company analyzes committed customers as its hearts as they can possibly be a source of favourable word-of-mouth referrals. These customers are more resistant to competitors' offers. Else than this result, customer relationship management gives a point of leverage to realize economies of scope. Customers who are committed are normally amenable to line extensions. Leveraging the customer base can use cross-selling complementary products as well as selling up to greater quality alternatives. The power of customer relationship management to minus costs has been seen as well in the past years. When customer relationship management is used along with other work processes, the tactic is smart enough of lowering churn or turnover in a company's customer base.  Thus, improved customer management can go to lesser sales and service costs, higher buyer retention and lower customer replacement expenditures.

 

Case related examples

Many organizations have used customer relationship management into their operations. One of these companies is the Irish Life and Permanent, which offers a wide range of life assurance, investment products and pension for individuals and groups to over a million clients in Ireland (Kotler, 1991). As the market leader of the business in the area, the organization wants to partner with TSB Bank so as to become the greatest provider of financial services within the country. Among these two separate organizations, three customer relationship management systems were in use, making the identification of prospects not easy. Both organizations wanted to use a single customer relationship management system in order to present a united post-merger image and give its sales power the information it required to sell joint products. In order to maximize revenues and increase customer satisfaction, a software platform that would sustain seamless, quality sales and services through multiple lines of business, product lines and channels of communication (Pura, 2005). By this integrated profile, every customer's policy data and history will be easier for Irish and Permanent to confirm prospects for a better business growth. The organization had this problem resolved by having an HP server, which is used as the database server.  With this, an integrated, single view of customer information is given. Additionally, the customer relationship management system provides a comprehensive picture of the company's different products and services. The implementation of the new system had put Irish Life and Permanent's IT department under tremendous stress and pressure in the process to quickly get the solution implemented and in production. Then, after completing the front problems, the solution allowed Irish and Life Permanent to sell its items and products to their TSB clients through customer information analysis; automatic generation of recommendations; negotiation of financial models depending on the customers' distinctive profiles and presentation of these solutions in various eye-catching graphical and text-based styles (Kotler, 1991). The customer relationship management system provided assistance to the organization to present personal finance to customers in a better approach. On the overall, the customer relationship management applied by this company increased satisfaction of customer and assists the organization to become Ireland's best provider of personal financial services.

FAW-Volkswagen had been created in 1991 and was recognized for its production of modern cars in China. This organization is the only manufacturing company in the country who is able to create luxury class sedan. This organization was in the overall of others who is dependent on customer relationship management strategies. The organization implemented the CRM system because of business issues. Examples of issues are unresponsive customer service, slow reaction times, lack of real-time information deficient incorporation of data and processes and shortage of IT personnel (SAP AG, 2001). The organization markets their products on sale through regional dealers. The problem is, this organization did not succeed to acquire direct customer feedback it required to ascertain superior customer service and obtain market intelligence.  In the time of few months, the organization executed mySAP Customer Relationship Management in the process to upgrade its customer service and obtain more important information about its client base. The company also trust that mySAP customer relationship management can strengthen their relationship with the clients and incorporate all usage of customer service. The reason of the organization for implementing the customer relationship management system is because of three main aspects which are sales, service and marketing. Through such system, the organization's clients can access the company's services by telephone, fax, e-mail and the Internet. The system is tightly integrated, which allows the organizations to share communication and information with the clients, service representatives and the entire enterprise (SAP AG, 2001). Looking at the management of the organization, the CRM system made real-time data on dealers, clients and also products. Due to this, the CRM system was a crucial key in allowing customer service representatives to obtain the latest product information and also help the customers anytime. Such representations are able to give better decisions given through first hand information while looking and maintaining customer satisfaction. Looking at the long term goal, the organization wishes the system to assists them in reaching their objectives. These goals include:

faster reaction to market changes

achievement of very high customer satisfaction

become the best automotive manufacturer in China

In the first few stages of implementation, the organization made few agents to work in the department of customers, servicing up to 800 calls every minute, regardless inbound or outbound. Up till now, such system has got positive direct results, with the call processing, activity management, management of electronic mails, monitors and improves contact with customers.

The Interamerican Group, a leading Greek insurance company, another company which utilized customer relationship management system. In many years, this organization was holding the prime position in the life insurance industry. This organization is also considered among the leaders in property and casualty insurance sectors. Since 2001, this organization is part of a Dutch Holding company, Eureko BV, in which at present, owns 98.07% of the insurance company's share capital (SAS, 2002). This merger was carried out according to the objectives of ensuring satisfaction in the needs of people who change in the insurance and business field. The organization can provide a lot of services include:

health care

financial

banking services

The companies associated to the insurance company will be able to enjoy the privilege and support of the organization's service and product. Such benefit gave the company an opportunity to become stable and also able to give a huge range of good quality service and product. In 1999, insurance activities were able to give 417 million (142 billion GDR) of revenue, resulting to a big increment of 53% in comparison to the 1998 insurance activity. The consolidated revenues for the group exceeded 587 million (200 billion GDR) in 1999. Consolidated profits before tax exceeded 182 million (62 billion GDR) in 1999, an increase of 160% from 1998 (SAS, 2002).

Although there is progressive growth in the organization, the competition in their market is very tight. In the past ten years, alarming results were shown from statistics. For example, a 35% increase on the number of claims has been observed. A 317% increase was observed in the average cost of claims whereas only 226% increase was derived from the average premium.  Though these results were not as terrible as in the Interamerican case, still the outcomes alone were enough for the company to be noticed.

In order to cure this problem, the organization had to first understand the loss-ratio or the factor that shows the gross profit for the business for different segments. For example, in the automobile insurance, this should be referring to the type of use of the vehicle, either private or professional, and so on.  Through this system, segments that give to the uprising of loss ratio will be revealed. By thinking of all contributory factors for a high loss ratio, the accurate risk exposure for case can also be known. In the response to it, the organization adopted the Rate Making Solution created by SAS, which is more than just the application of traditional regression analysis. SAS was chosen by the organization to assists them employ technology in order to achieve more knowledge about their processes and data. As the biggest privately developed software company in the world, SAS currently serves over 37,000 customer sites held in more that 111 countries worldwide. Known for its effective services, more than 3.5 million of its users have seen how SAS can change raw data into extraordinary insights (SAS, 2002).  The application of this customer relationship management system in the company had allowed them to get their corporate aim based on revenue growth so as to augment market share without retaining profitability behind. The project had assisted the organization in finding out customer segments and related exceptions. Hence, the customer relationship management application had also assisted the organization developed underwriting rules through upgraded comprehension of the pricing policy and its implications. According to the company management, the task has not only enabled them to respond better to the change of trends in the market, but also the most important thing the project has coached them was how to understand and serve their different rate groups better insights (SAS, 2002).